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2016 (6) TMI 1116 - AT - Income TaxDisallowance u/s.80IA in respect of Wind Mill business - assessee is engaged in the business of manufacturing and job work in electronically engraved copper rollers and trading of pipes circles etc. - Held that - No hesitation in holding that the appellant is entitled to the claim u/s. 80IA on the income derived from wind mill project without notional setting off of losses of earlier years. See Velayudhaswamy Spinning Mills P. Ltd. v. Asst. CIT 2010 (3) TMI 860 - Madras High Court Addition of prior period expenditure - CIT(A) deleted the addition - Held that - Though the quantity discount was given during the year under consideration but were on account of sales made in earlier years. In our considered opinion this cannot be considered as a prior period expenditure since the expenditure has been incurred during the year under consideration. We therefore decline to interfere with the findings of the ld. CIT(A)
Issues Involved:
1. Deletion of disallowance of ?48,77,722/- made by the Assessing Officer under Section 80IA of the Income Tax Act in respect of Wind Mill business. 2. Deletion of disallowance of ?10,00,000/- made by the Assessing Officer on account of prior period expenses. 3. Admission of additional evidence by the Commissioner of Income-Tax (Appeals) in violation of Rule 46A of the Income Tax Rules. Issue-Wise Detailed Analysis: 1. Deletion of Disallowance under Section 80IA: The Revenue's primary grievance was the deletion of the disallowance of ?48,77,722/- made by the Assessing Officer (A.O.) under Section 80IA of the Income Tax Act concerning the Wind Mill business. The A.O. contended that the profit from the eligible business for determining the quantum of deduction under Section 80IA should be computed after deducting notional brought forward losses and depreciation, even if these had been set off against other income in earlier years. The Commissioner of Income-Tax (Appeals) [CIT(A)] disagreed, relying on the decision of the Hon’ble Madras High Court in the case of Velayuddhaswamy Spinning Mills Pvt. Ltd. vs. ACIT, which held that only losses from the initial assessment year should be brought forward and not losses from earlier years that were already set off against other income. The CIT(A) noted that the assessee had installed the Wind Mills in the previous year relevant to the Assessment Year (A.Y.) 2006-07 and had not claimed the deduction under Section 80IA in those years. The CIT(A) concluded that A.Y. 2009-10 would be the initial assessment year for the purpose of Section 80IA(5). The Tribunal upheld the CIT(A)'s decision, finding no distinguishing decision in favor of the Revenue and noting that the facts were identical to those in the Velayuddhaswamy Spinning Mills case. Therefore, the Tribunal dismissed the Revenue's appeal on this ground. 2. Deletion of Disallowance on Account of Prior Period Expenses: The second issue involved the deletion of the disallowance of ?10,00,000/- made by the A.O. on account of prior period expenses. The A.O. had disallowed this amount, believing it related to prior period expenditure. However, the CIT(A) found that the quantity discount was given during the year under consideration but was related to sales made in earlier years. The Tribunal agreed with the CIT(A), stating that the expenditure was incurred during the year under consideration and could not be considered a prior period expense. Consequently, the Tribunal dismissed the Revenue's appeal on this ground as well. 3. Admission of Additional Evidence in Violation of Rule 46A: The Revenue also contended that the CIT(A) had erred in admitting additional evidence in violation of Rule 46A of the Income Tax Rules. However, this issue was not elaborated upon in the Tribunal's order, suggesting that it did not find merit in the Revenue's contention or that the additional evidence admitted did not significantly impact the final decision. Conclusion: The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on both the deletion of the disallowance under Section 80IA and the deletion of the disallowance of ?10,00,000/- on account of prior period expenses. The Tribunal found that the CIT(A) had correctly applied the relevant legal principles and judicial precedents in reaching its decisions. Order Pronouncement: The order was pronounced in Open Court on 14-06-2016.
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